Recently in the UK, the Domestic Inflation figures have been struggling; much like their European neighbours. For the last three months the UK, the Consumer Price Index figures have been released at 0% or under. Typically this would hinder the domestic currency strength of the country releasing the below par figures; However, this is not the case with the UK.
The Bank of England last month published it’s inflation report. This report suggested that the Inflation levels in the UK should start to normalize in 2016, also that the inflation targets of 2% should be achieved by 2017. The Inflation levels are important in the UK as they are the ultimate key indicator to open up the doors to further monetary tightening which would start to bring interest rates back to “normal” levels.
Wednesday night this week, the UK will release their next leading indicator of inflation levels in the UK; the Average Earnings Index. This particular release will show the three month moving average wage growth levels, compared to the same period last year. The figure is expected to show substantial growth from the previous year’s figure. The expectations on this event will be that the figure will show 2.5% expansion on last year’s reference months. This should assist the GBP/AUD as Wage Growth is a huge leading indicator for future inflation levels in a country.
This week out of Australia we will be relying on the Reserve Bank of Australia (RBA) for some much needed good news. Today we have RBA Assistant Governor Christopher Kent speaking in Canberra. Another announcement is expected on Tuesday; from RBA Assistant Governor Guy Debelle, in Sydney. Given the recent Interest Rate cut hints from the RBA’s Governor, Glenn Stevens, market analysts are keeping an ear out for further hints on future monetary policy.